Crowdsourcing: Great For Your Business (A Handy Primer)

You may have heard of crowdsourcing. But do you really understand what it is and why it's a great way to help your business?

Here's a quick primer to get you up to speed. You'll learn how crowdsourcing can be used for everything from making maps to building burgers.

In Part 2 of this series, we'll share some specific examples and tips for success.

[Don’t confuse crowdsourcing with crowdfunding, which is about raising money.]

Crowdsourcing is a flexible form of managing labor, which allows you to get a large number of workers, only when you need them. You decide which skills you want, and workers supply them—sometimes from nearby, sometimes from another continent.

We know what you’re thinking:That sounds like outsourcing—right?

Yes and no. Crowdsourcing is fundamentally different from outsourcing, says crowdsourcing expert and author of Crowdsourcing for Dummies, David Grier.

“Outsourcing is taking some division or process to a cheaper labor market. The big advantage is cheaper labor,” he told me. “Crowdsourcing is managing labor to get a more diverse set of skills.”

Yes, crowdsourcing will often save you money, but that’s not the main point. It’s about quickly finding many workers, often with specialized expertise.

It uses countless contributors, who each add their bit of expertise, and updates its content 24/7. If it were published like a traditional encyclopedia, it would be updated every four years and would contain far less information.

And it produces quality results. Yes, we’ve all heard the jokes about inaccuracies, but at least 12 independent, comparative studies have shown that Wikipedia is at least as accurate as conventional, commercial encyclopedias, such as Britannica and Encarta—arguably more accurate.

Enterprise Crowdsourcing

For the enterprise, it’s often performed through an agency.

Agencies provide and manage workers for specific tasks, when you need them. Crowdsourced workers can be used for translating and localizing information, checking products for quality, reading handwriting, or even coming up with new ideas.

In other words, crowdsourcing is good for anything that needs to be done quickly, but requires a human touch.

Amazon uses crowdsourced workers to create online catalogs. Google crowdsources SEO experts. Yellow Pages uses them to go out and make sure its mapping directories are still correct.

“Buyers of crowdsourcing in [the] enterprise are starting to realize the potential of this model,” said Carl Esposti, CEO of Massolution, a crowdsourcing firm that does extensive research on the topic. “Machines can only do so much.”

Crowdsourcing Has Four Main Categories:

Microtasking is assigning short tasks—for example, bits of translation, handwriting recognition, or identifying the nature of webpages—that require just a little human expertise. Amazon’s Mechanical Turk is the behemoth in this category.

Macrotasking involves using short-term help for more complex tasks, including coding. It’s often done through sites like Odesk,Elance, or Topcoder—they’re like an online market for freelancers.

Crowd Contests are created to find an individual who can best solve a problem for you. They’re often used for data analysis or graphic arts. Say you need a label designed: You can specify your requirements, hold a design contest, and only pay the winner for the result you’ll actually use.

Ideation—idea generation—is used chiefly by enterprises to find possible solutions to a complex problem. For example, Netflix gave a million-dollar prize in 2009 to a team that found a way to improve its algorithm for recommending movies. Companies can use an ideation firm like Spigit to seek, post, or collaborate on an idea for a product or solution. The U.S. Navy has an online ideation game, MMOWGLI, intended to crowdsource some of its most “wicked” problems.

Data Driven

To fill all these needs, the crowdsourcing workforce is expanding fast, Esposti said. A 2012 study by his company offers some eye-opening data:

Who Are The Workers? Many crowdsourcing workers are highly skilled. Some 60% live in North America and Europe, and almost 75% have a college degree or more advanced education.

Who’s Using Crowdsourcing? Startups and small businesses make up 80% of crowdsourcing clients, but account for only 60% of crowdsourcing revenue. Large enterprises have fewer transactions, but spend more for them. They account for 21% of crowdsourcing revenue, a percentage that’s rising fast.

Where Are The Users? Europe is the largest buyer, accounting for 36% of world demand. Europe and North America together make up 90% of crowdsourcing buyers.

The Bottom Line

Crowdsourcing is more than just outsourcing: It’s an incredibly flexible and effective way to solve problems, add value, and bring specialized expertise into your organization.

In tomorrow’s business, crowdsourcing will be a common way of augmenting a company’s workforce.

Now that you’ve got a basic idea of what crowdsourcing is, you can start thinking of ways your company can use it. Don't miss Part 2, where I talk in more detail about some interesting examples, and offer hints on handling tricky situations.